(November 10, 2000) The FCC discussed and adopted, but did not release copies
of, a Policy Statement and a Notice of Proposed Rulemaking, pertaining to taking
steps towards allowing secondary markets in wireless spectrum rights. FCC staff
and Commissioners said that they seek to avoid shortages in spectrum for
wireless telecommunications and mobile Internet access devices.

FCC Chairman
William
Kennard

Federal
Communications Commission (FCC) Chairman William
Kennard stated that "I believe that spectrum scarcity is the most
serious challenge facing the wireless industry today, and therefore, facing
consumers of wireless services today. Demand for spectrum is outstripping
supply, particularly in the prime spectrum below 3 Gigahertz. And this should be
a national priority for us. And it is only going to get worse, as more and more
people start demanding access to these wireless web devices."

The Commission voted on, but did not release
copies of, a Policy Statement and Notice of Proposed Rulemaking (NPRM) on this
topic. However, FCC staff summarized the two items, and Commissioners discussed
them. They stated that the FCC should move in the direction of allowing
secondary markets in wireless spectrum rights, but provided few details as to
what this means.

The two items pertain to wireless spectrum, but not to broadcast spectrum.
Moreover, not all wireless spectrum would be covered. There was little talk of
property rights, ownership, free markets, and contracts, and much talk about
continuing "Commission management" of this "national
resource," with continuing application of existing FCC rules on spectrum
caps, eligibility rules, and other matters.

Nevertheless, one Commissioner, Gloria
Tristani, criticized the Policy Statement for not also incorporating an
examination of social issues, such as diversity and local content.

Another Commissioner, Harold Furchtgott-Roth,
ridiculed the FCC for not going far enough. These two items are "positive
steps in the right direction," he said, but "baby steps."

He stated that there is no market place for spectrum rights, other than the
FCC. If parties wish to buy or sell spectrum rights, they must ask the FCC.
"And we at the FCC make spectrum rights extraordinarily complicated. We tie
them in knots. We throw in a bag," said Furchtgott-Roth.

He went on to compare the FCC's market for spectrum rights to "a pig in
a poke."

He elaborated that there are "consistent themes" in the license
transfer process: "impatience with delays; puzzlement with the complexity
of Commission rules, fear of the unknown of outcomes that are entirely
unpredictable, and frustration with the absence of remedies for bad
outcomes."

Moreover, said Furchtgott-Roth, the two items adopted by the FCC will do
little to change things. "We must not kid ourselves. We are still going to
be spending most of our time dealing with parties coming before this agency
pleading, parties that are going to be continually frustrated with delay,
parties that are going to continually be puzzled by the complexity of our rules,
parties that are going to be mystified by the range of possible outcomes and
unaware of any way of evaluating the likelihood of those, and parties that are
going to be at the end of the day dismayed because there is no remedy."

He concluded that "until we make the bundle of rights that exist with
spectrum, clear and predictable, less a pig in a poke, and more a bundle of
rights that can be traded in markets throughout America, we will not have solved
the problem of secondary markets for spectrum."

Policy Statement

Tom Sugrue, the Chief of the FCC's Wireless
Telecommunications Bureau, stated that "radio spectrum is an
increasingly scarce national resource. That scarcity is being driven by
increased demand, which in turn, is being propelled by a host of developments,
including the growing shift of the economy towards the service sector, the
increased mobility of our workforce, and the convenience and efficiency produced
by mobile communications, combined with improved performance, and the falling
cost of portable devices. Demand is expected to continue to grow, given the
dramatically growing interest in access to the Internet on a wireless basis.
This demand necessitates an aggressive and innovative approach to spectrum
management. I believe very strongly that an expanded system of secondary markets
could held alleviate spectrum shortages, by making unused, or underutilized held
by existing licensees more readily available to other users."

Lisa Gaisford, of the WTB, elaborated on the Policy Statement. She stated
that "some spectrum is not being used to its fullest capacity, and may be
available for other uses."

"We believe that an effectively functioning system of secondary markets
would allow and encourage licensees to freely trade their unused, or unneeded,
spectrum," said Gaisford, by "either leasing temporarily, or on a
longer term basis, or trading their usage rights."

Gaisford, who read a prepared statement, said that "the Policy Statement
articulates four guiding principles for the Commission's efforts to match unmet
demand with available supply on a secondary market."

"First, Licensees should generally have clearly defined right to use
spectrum, including frequency bands, service areas, and license terms of
sufficient length, with reasonable renewal expectancy to encourage
investment."

"Second, the right to use spectrum should be easily transferable for
lease or sale, divisible, or aggregatable."

"Third, licensees and users should have flexibility in determining the
services to be provided and the technology used for operation, consistent with
the other policies and rules governing the service."

"And fourth, licensees and users have a fundamental obligation to
protect against, and the right to be protected from, interference to the
extent provided in the Commission's rules."

She also stated that "The Policy Statement outlines three core areas of
focus for the Commission's efforts in the development of secondary
markets."

"First, eliminate unnecessary regulations and administrative
requirements. Second, promote the availability of frequency and technically
agile equipment. And third, support more effective functioning of market
processes."

NPRM

Tom Sugrue then proceeded to talk about the Notice of Proposed Rulemaking,
which he said will "clarify and revise Commission policies and rules in a
manner that will promote the development of more robust secondary markets for
the use of radio spectrum."

Paul Murray, a staff attorney in the Policy and Rules Branch of the WTB, then
spoke at greater length about the NPRM.

"First, the NPRM determines that wider use of spectrum leasing by
existing Commission licensees of wireless radio spectrum will promote the public
interest. Spectrum leasing encompasses a variety of arrangements that licensees
might enter with third parties, including other licensees. These range from from
the leasing of excess capacity on licensees' existing systems, to the leasing of
portions of, or all of the spectrum licensed. Wider use of spectrum leasing
would increase the efficient use of spectrum and enable more entities to gain
access to the use of that spectrum."

Murray continued: "Next, the NPRM proposes to clarify and revise
Commission policy and rules to allow most wireless radio licensees that have
exclusive right to the use of spectrum, to lease that spectrum to third party
users. In any of the licensed geographical service area, in any quantity of
frequency, and for any period of time during the licensed term, and to do so
without having to procure prior FCC approval. The proposal set forth in the NPRM
would not apply to broadcast licenses."

"A central feature of the spectrum leasing proposal is that licensees at
all times retain ultimate responsibility and accountabilities for insuring that
their lessees comply with the requirements of the Communications Act, and all
applicable Commission policies and rules."

Murray also elaborated on the policies and rules that the NPRM proposes would
apply. This would include "interference, frequency coordination, and other
technical rules applicable to the licensee, would apply to the entities leasing
the spectrum." In addition, eligibility rules, spectrum caps, and unjust
enrichment rules would also apply.

Murray also stated that the NPRM proposes to apply a less restrictive
transfer of control standard than the Intermountain Microwave standard
for interpreting Section 310(d) should not be applied to these arrangements.

Dianne Cornell, the Chief of Staff of the WTB, is the project manager for
this NPRM.

More From Kennard

"I believe that spectrum scarcity is the most serious challenge facing
the wireless industry today, and therefore, facing consumers of wireless
services today. Demand for spectrum is outstripping supply, particularly in the
prime spectrum below 3 Gigahertz. And this should be a national priority for us.
And it is only going to get worse, as more and more people start demanding
access to these wireless web devices. We really are going to have to stay ahead
of this, this spectrum drought, as I call it sometimes.

"The good news is that we have been making some important progress in
recent years. A year ago we adopted our landmark spectrum policy statement. We
had some very important hearings, which we instigated by Commissioner
Ness."

"We are moving steadily to grant greater flexibility in our allocations
and operating rules, so that providers can respond more easily to the demand for
spectrum in the marketplace."

Kennard also described this as a "bold progressive initiative"
However, he added that "I am not suggesting that this is the silver bullet,
but I do believe that it is one of a number of pieces of the puzzle that
collectively can give us all a better sense of confidence that we are managing
the spectrum as efficiently as we can. The other initiatives that we have been
working on in this area are software defined radios, ultra wideband, just, all
the many things that the Wireless Bureau has done to more efficiently manage
this resource."

Kennard added that these proposals are important for "philosophically
what they represent. They represent the Commission's understanding that we have
to ease back and support more market based solutions to managing this
resource."

All FCC employees contacted by Tech Law Journal regarding the topic of this
story either did not return phone calls, or declined to provide information.